Cooperatives, investment incentives at the heart of agricultural revolution

The freshly appointed Minister of Agriculture and Rural Development Nguyen Xuan Cuong talked to VIR’s Manh Bon about the current challenges facing Vietnamese farmers and what the government is going to do in its efforts to help them.

Some people said that the current capacity of Vietnamese agricultural production will not be up for the competition brought by the country’s new trade pacts. What is your opinion of our chances?

This is true. At the moment, Vietnamese agricultural production is very fragmented, with 12 million households cultivating an average of 0.3 hectares each. The whole country has 3,100 companies and 1,000 cooperatives in the field. Vietnam is integrating deeper into the world economy and there is no large-scale production or focus on key products where we have a competitive edge.

Without reform, our agricultural products will not be able to compete. That is why we need a revolution.

Does this mean that the previous three years of reform was fruitless?

Some localities have been successful. For example, Dong Thap focuses on five products where it has a competitive edge. Lam Dong uses high-technology to produce vegetables and flowers. These farmers earn VND245 million ($11,000) in revenue a year on each hectare of cultivation.

Some companies, such as TH True Milk, Vinamilk, and Moc Chau Milk, have made sizeable investments into agriculture, using high-tech to produce and process products and gained a strong position in the domestic market as well as developed capacities to export.

However, there are not many Vietnamese agricultural products that are highly competitive on the global market.

How exactly will this revolution begin?

When one household cultivates 0.3 hectares on average, how can they apply high-tech to decrease costs and preserve their produce after harvest to increase efficiency? And most importantly, how can they negotiate with wholesale buyers to ensure a good price?

In order to do these things farmers have to cooperate and produce together in cooperatives. We issued the Law on Cooperatives in 2012 but after three years there are only 1,000 cooperatives.

Does this mean the Law on Cooperatives did not have an effect?

The problem is in the implementation. In localities where the authorities care about this model, cooperatives grow. Where it is neglected, there is no progress.

The different regions of Vietnam have different strengths in agriculture. Some localities have strong specialty products, but if farmers continue producing on a small scale and try to undercut one another, they will not be competitive against other countries. It would be much more efficient if farmers came together and worked with companies.

On the part of companies, in the next years ministries are going to make policies to grow agriculture, especially by providing incentives to encourage higher participation by companies. Also, local authorities will be required to introduce measures to encourage farmers to join cooperatives.

You just mentioned incentives, but there are already a lot of them in place with the purpose of encouraging investment into agriculture. Do the existing incentives not work?

They do to some extent. At the moment, a number of big companies and conglomerates have investments in agriculture. Still, for a country with about 60 million people and only 3,100 companies on the field, the current incentives are not enough.

As competition grows, if there are no companies to drive innovation and no cooperatives to create a backbone to Vietnam’s agricultural sector, production will continue to be fragmented, low-tech, and low value . Thus, the revolution is going to start by pushing cooperatives to the frontline and encouraging companies to invest in agriculture.

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